Venture Debt Faces Scrutiny as Critics Question $1.5 Million Credit Line and Added Pressure to Repay for Early-Stage Startups

The discussion surrounding venture debt has intensified, with several voices expressing skepticism about its suitability for early-stage startups. Critics argue that venture debt, which often requires startups to maintain significant cash reserves and incurs additional pressure to repay, may not align with the needs of companies seeking risk capital for growth. One commentator highlighted that startups might receive a $1.5 million credit line but would need to keep an equal amount in the bank, effectively limiting their financial flexibility. Others noted that the pressure to repay debt could hinder a startup's ability to make strategic decisions. In contrast, some discussions suggest that venture debt could be more appropriate for businesses with established cash flow. The ongoing debate emphasizes the need for founders to carefully consider their options between debt and equity financing as they navigate their growth trajectories.